Latin America Sounding the Alarm: Debt-Threatened Democracies

Drowning in debt, threatened democracies look to Washington for help

As the New Year dawned, Mexico was bracing itself for a painful reality. Jan. 1 marked the start of the Pact for Economic Stabilization and Growth, the latest package of wage and price controls intended to help keep Mexico's inflation rate below 20%. But it will probably pinch workers, whose real earnings have fallen steadily since 1982, and add further stress to an economy already staggering under more than $100 billion in foreign debt.

The implications could be explosive. Three days after President Carlos Salinas de Gortari announced the belt-tightening measures last month, hundreds of government workers demanding pay increases stormed...

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